Good morning! The swap rate cut surely will not make PIIGS- debt and European banks' balance sheet trouble magically disappear - though it helps with immediate liquidity issues. The choice of end game scenarios is still up to Germany, and therefore I've included some links to recent articles from Spiegel. I will be paying a closer attention to the silent signals from Germany - sometimes the most important things are the ones left unsaid. If you are horribly interested in the swap rate cut, after checking my today's links, please visit my swap special from yesterday. Other posts from yesterday were credit guest, morning, extra, and evening.
The extremely weak Chinese PMI explains the sudden need to ease monetary policy, but it will probably only lead to more bubble building, as hardly cheaper credit in China will revive their export markets in Europe.
Then a special Christmas greeting for my Croatian audience via Nigel:
Nigel Farage: EU bribing independent Croatia to rejoin a 'new Yugoslavia':
UKIP Nigel Farage in Croatia ,European Union membership debate (this is the first part, Part 2, Part 3):
News (Thu morning) – BTH
Morning Briefing (1-Dec) – BNY Mellon
Market Preview (1-Dec) – Saxo
Markets Live – alphaville FT
Debt crisis: live – The Telegraph
EZ crisis Live blog – The World / FT
EURO CRISIS
Europe's Hamiltonian moment has come: One year ago, we wrote that Europe was heading fast towards a crossroads where it would have to choose between a debt jubilee (wide-scale debt repudiation) and debt assumption (a form of fiscal federalism with enhanced control over national budgets accompanied by centralised funding of governments). We think this bifurcation point has now been reached.
The Eurozone debt crisis: Slipping into a double-dip recession? – voxeu.org
Those following developments in Europe fear another Lehman Brothers disaster, where one failure triggers several others and a global recession follows. This column suggests that recent history may already be repeating itself – but with even more severe consequences unless drastic action is taken.
The solution to the debt crisis won't be budget cuts, more taxes, and more rules to force them down the throats of Italians, Spanish and Greeks. Merkel, Sarkozy and their counterparts have to find a broader solution. Otherwise, Europe is facing a race to the bottom.
Response to Yanis Varoufakis Regarding Our Eurozone Exit Plan – naked capitalism
Mosler/Pilkington: We should also point out that having a viable exit plan and having this exit plan and its possible results openly talked about gives the peripheral countries more bargaining power vis-à-vis their austerity loving neighbours. At the moment we should be focused on drafting any sort of national strategy that can give power back to sovereigns vis-à-vis the Eurozone.
“The moral superiority of the Germans” – Marginal Revolution
I believe that the Germans have approached this crisis with some bad economic theories, a lack of understanding of how government spending cuts can be self-defeating in the short run, and a good deal of more or less deliberate self-deception about its partners in the union, not to mention Germany’s own ability and willingness to act “fully European.” I’m also not sure that Germany has a path out of this which leaves their own financial system intact.
SPIEGEL ON EZ CRISIS
Some see Germany's Federal Constitutional Court as as a guardian of democracy in the euro crisis, others see it as an obstacle to rescuing the currency. Now members of Chancellor Merkel's ruling conservatives want to lessen its power by amending the constitution -- to remove its jurisdiction over European issues.
Interview with Ex-Greek Prime Minister: 'The EU as an Institution Is Still too Slow' – Spiegel
The reasons behind his surprising resignation and the new hope for national unity in Greece. He also advocates the implementation of euro bonds, saying it's time for European solidarity in the financial crisis.
Saving the Common Currency: Euro Zone Looks to IMF for Increased Help – Spiegel
Euro zone finance ministers agreed on Tuesday night on measures to boost the euro backstop fund. But with the crisis rapidly worsening, the IMF may increase aid to the stricken currency union. European currency commissioner Olli Rehn says the euro is entering a critical 10-day period that may determine its fate.
Preparing for the Worst: The High Price of Abandoning the Euro – Spiegel
There is mounting speculation that the euro zone will break apart, or even that the single currency will be abandoned altogether. It often sounds as if such scenarios wouldn't be so bad for Germany. In fact the consequences would be catastrophic for Europe and for its largest economy. Part 1, Part 2, Part 3, and Part 4
Germany, as the most powerful country on the Continent, must finally step up and show the courage to resolve the debt crisis.
SWAP RATE CUT
Central Banks’ Latest Move Shows Desperation – The Big Picture
Roundup of comments on swap rate cut
Swap lines – not a panacea – Pragmatic Capitalism
The program has been in place since 2007 so the announcement is just an alternative form of something that was already in place.
Goldman On Today's Coordinated Central Bank Bailout: "It Isn’t Enough To Save Anyone Or Solve Everything" And "Why Now?" – ZH
The difference between OIS + 50 and OIS + 100 isn’t enough to save anyone or solve everything. It’s the symbolism of policy-makers again acting in concert that I find most encouraging. Why act now – is there something lurking around the corner? GS also cut europe’s GDP forecast from +0.1 to -0.8%.
The difference between OIS + 50 and OIS + 100 isn’t enough to save anyone or solve everything. It’s the symbolism of policy-makers again acting in concert that I find most encouraging. Why act now – is there something lurking around the corner? GS also cut europe’s GDP forecast from +0.1 to -0.8%.
It’s The Thought That Counts – TF Market Advisors
I expect ECB rate cut and promises of treaty agreements. I am far less convinced that ECB will print in which case this rally has gotten far ahead of itself because this is not enough to stop banks from continuing to reduce their balance sheets.
OTHER
New Evidence for Humanity’s Irrelevance: Revenge of the Algos – allaboutalpha.com
This “race to zero,” Bloomberg suggests, is becoming rather stale, and the question is: where does the next advantage lie? Algorithms are going qualitative.
The Punch Line: "Crash Test - Bracing For Breakup" – ZH
A very different kind of a market newsletter.
China Manufacturing PMI Plunges to 32-Month Low of 47.7 – Zero Hedge, Mish’s, Also Sprach Analyst, Danske (pdf), alphaville / FT
DIVERSION
The Psychology of Nakedness – Wired
If you are naked, you will not be taken seriously.
Can beggars be choosers? – Dan Ariely
Good lessons for the mostly bankrupt nations and institutions.
A chess board for three players – 3manchess
FiveBooks interviews: Michael Farr on Tintin – The Browser
Why do the Tintin stories have such enduring appeal? A Tintinologist tells us what makes them special, how their creator, Hergé, came to write them, and why he was accused of being a Nazi collaborator
Classic article from 1943